Calculate Personal Tax Liabilities for Individuals and Partnerships

Question 1
You are a trainee accountant, and a friend, Janet Wilson, has asked you to help sort out her tax for 2005/06.
She provides you with the following information:
1. She works three days a week for Milford Ltd as a Marketing Manager, with an annual salary of £18,000, from which PAYE of £3,000 had been deducted.
2. Milford Ltd provides her with a company car. It cost £13,800 when new, has emissions of 150g/km
and has a diesel engine. Janet pays all the running costs, including the fuel.
3. Milford Ltd gave Janet a loan on 1 August 2005 of £7,000 to pay for home improvements. Janet pays the company 2% interest on the loan, but has not repaid any of the loan itself.
4. On 6 December 2004, the company provided Janet with a laptop computer costing £2,000, and
on 1 May 2005 provided her with a mobile telephone.
5. On the other days of the week, Janet runs her own marketing consultant’s business, the assessable trading profits from which for 2005/06 were £25,000.
6. Janet received other income of:
£
Building society interest 116
Dividends 189
Interest from an ISA 204
You are required to:
From the information given above and below:
• Calculate the total assessable benefits in kind for 2005/06. If a benefit is not assessable, you need to state why
• Prepare a computation of taxable income for 2005/06, clearly showing the distinction between the different types of income.
• Calculate the net income tax payable for 2005/06.
• State the date by which the tax payable in Task 1.3 is due.
• Calculate the payments on account for the tax year 2006/07, stating their due dates
• Without going into detail about the merits of each scheme, advise Janet on the tax implications of:
• joining her company’s Occupational Pension Scheme, which would require Janet to contribute 5% of her basic salary, and the company paying the remaining 7%.
• taking out a Private Pension, paying approximately 6% of her self-employed profits
Notes:
Tax rates and bands:
% £
Starting rate 10 first 2,090
Basic rate 22 next 30,310
Higher rate 40 over 32,400
Savings income taxed at 10%, 20% and 40%.
Dividends are taxed at 10% and 32.5%.
Personal allowances:
Personal allowance £4,895
Car benefit percentage:
The base level is 140g/km.
The base figure for petrol is £14,400.
Inland Revenue official rate – 5% Capital gains tax
Annual exemption £8,500
Indexation factors:
August 1996 to April 1998 0.062
Taper relief for non-business assets:
Number of years held after 5 April 1998 % of gain
2 or less 100
3 95
4 90
5 85
6 80
7 75
8 70

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